Homebuyers taking a typical two-year fixed mortgage face paying £131 more each month than they would have in March following a renewed surge in mortgage rates.
The average 2-year fixed rate has climbed from 4.84% at the start of March to 5.73%, according to the latest analysis from Moneyfacts.
For someone borrowing £250,000 over 25 years, the increase adds an estimated £1,572 a year to mortgage repayments.
The rise comes as major lenders including NatWest, Santander, HSBC, Lloyds Bank and TSB increase selected fixed rates for the second time since the beginning of September.
SECOND WAVE
Moneyfacts says higher swap rates are driving the latest repricing, with rates climbing above 4.70% amid renewed concerns about inflation.
Its average new mortgage rate now stands at 5.68%, compared with 5.59% at the beginning of August and 4.90% at the start of March.
Average 5-year fixes have also risen sharply, from 4.96% in March to 5.78%.
Rachel Springall, Finance Expert at Moneyfacts, says: “A second wave of mortgage rate hikes has begun from the major banks in reaction to growing concerns surrounding inflationary pressures.
“Swap rates have climbed above 4.70%, leading lenders such as NatWest, Santander, HSBC and TSB to increase selected fixed rates for the second time this month.
“It is highly likely other lenders will follow suit to adjust rates.”
BUYER AFFORDABILITY
Moneyfacts calculates that a further 0.25 percentage point increase in the average two-year fixed rate, from 5.73% to 5.98%, would add another £38 a month, or £456 a year, to repayments on a £250,000 mortgage.
The renewed increases come ahead of the Bank of England’s next Bank Rate decision, although fixed mortgage pricing is influenced heavily by swap rates and market expectations rather than simply following changes to Bank Rate.
Springall adds: “The average two-year fixed mortgage rate is at its highest point since June, with the average five-year fixed back up to levels not seen since April. This will be hugely disappointing news for borrowers.”
She says borrowers approaching the end of existing fixed deals should consider their options early, particularly given continued volatility in mortgage pricing.
PAYMENT SHOCK
Ian Harris (main picture, inset), President of NAEA Propertymark, says: “Rising mortgage rates will be a concern for many homeowners and prospective buyers already navigating challenging affordability conditions.
“With fixed-rate deals continuing to increase ahead of the next Bank of England decision, consumers are facing greater uncertainty over the cost of borrowing and what this means for their household finances.
“Those coming to the end of historically low fixed-rate deals could face a significant increase in their monthly repayments when they remortgage.
“This underlines the importance of consumers engaging with a qualified mortgage adviser and exploring their options as early as possible, rather than waiting until their existing deal expires.”
BUYER PRESSURE
And he adds: “For the housing market to operate effectively, confidence and affordability are crucial. Continued volatility in mortgage rates risks putting further pressure on buyers who are already stretching their finances and could lead some households to delay moving altogether.
“Government, lenders and the wider industry must continue to work together to support borrowers through this period of uncertainty.
“Ensuring consumers have access to clear information, appropriate advice and a competitive range of mortgage products will be vital to maintaining activity and confidence across the housing market.”
